Valuing inventories at closing

The inventory valuation is an important step in the closing of accounts, as it allows you to determine the exact amount of your inventory at the end of the year, taking into account changes in quantity and value. From an accounting point of view, valuation enables inventories to be shown as assets at the balance sheet date. In this article:

• Inventory valuation
• Related accounting entries

Stock valuation

Your year-end inventory is valued on 2 levels:

• The quantities of stock available for each product: this involves an inventory of each of the stocks;
• Inventory unit value: this inventory unit value has been calculated based on the cost of your purchases related to this inventory (inventories are valued using the so-called weighted average cost method). If you would like to find out more, you can see the article on Average Cost Method.

At closing, you can perform this double-check from the Accounting > Closing → Inventory

Stocks with no accounting entry lines do not appear on the valuation page. To remedy this, delete these lines and re-enter them with a script.

Related accounting entries

Purchases and changes in inventory during the year

It all starts with the entry of an expense entry when you acquire the merchandise corresponding to the stock.

To do this, go to the Accounting > Book Entry > Inventory Management page and click on the details icon "Eye"

You can then vary this stock over the course of the year by replenishing or distributing it from the Forms & Campaigns > Online Store > Inventory management page. A line is created for the initial stock and then for each new supply/distribution.

Closing inventory valuation

When you valuate inventory at closing, the following entries are created:

• The value of the stock is debited to a category of type 37XXXX ;
• In return, this amount is credited to category 603000.

Example of a year-end inventory valuation entry:

Account 37 is shown on the balance sheet to reflect the inventory value as a closing asset. Account 603 reflects only the change in inventory compared with the previous year.

Reversal of inventory at the start of the next fiscal year

Once the balance sheet has been closed and the next financial year opened, a reversal (reverse entry) will be automatically made by the software to offset the valuation at closing.

Reversal will only be automatic if the valuation is entered from Closing & Stocks. If the entry is created via advanced accounting entry, the reversal must be made manually.

Example of reversal of opening inventory valuation:

Valuation takes place at each balance sheet date and reflects the change in value and quantity of inventory over the year.

A new valuation will therefore be carried out at the end of the following year. As this is a balance sheet entry, it represents a snapshot of the organization's assets at a given date.